Don't know why it is not part of core

Hierarchical groups should be part of BP core, just as hierarchical pages are of WP core.

In the meantime this plugin attempts to fill in the void. The plugin would be truly helpful when it adds the following functionality:
1. Creates subgroups list page/widget for each group
2. Affects automatic member propagation, i.e. if someone joins a subgroup, they automatically become members of its parent group too.
3. Makes breadcrumbs reflect group hierarchy.
4. Presents collapsible group tree to users while registering so that they can join groups and subgroups of their choice from the get go. Bit like BP Registration Groups, but tweaked for hierarchical groups http://wordpress.org/extend/plugins/buddypress-registration-groups-1/